What does Turkey’s new crypto legislation mean for foreign crypto asset service providers?

Turkey is in the final round for its new crypto legislation. The Proposed Law Amending the Capital Markets Law numbered 6362 (the “Crypto Proposal”), which is expected to enter into force very shortly, defines crypto asset service providers (“CASPs”) as “crypto asset trading platforms, institutions providing for crypto asset custody services and other institutions to be defined in the secondary regulation”.

According to the Crypto Proposal, new crypto asset trading platforms cannot be established and cannot start their operations until the secondary legislation is enacted. Among other things, the requirements of the licensing regime will be set out in the secondary legislation. Hence, the entry of foreign CASPs into Turkish market will be postponed for a while after the enactment of the Crypto Proposal. The existing platforms will be allowed to continue their operations until the issuance of the secondary legislation. These platforms will also need to apply to the Capital Markets Board (the CMB) to obtain an operation license once the relevant secondary legislation is issued.

The Crypto Proposal also prevents foreign platforms from providing services to Turkish citizens without an operation license and further lists the activities that may result in targeting Turkish citizens. As the CMB will have the authority to determine additional criteria for the definition of activities targeting Turkish residents, the developments regarding the crypto asset legislation in Turkey should be closely followed by foreign CASPs which are already targeting Turkish customers. It is important to note that monetary fines, as well as imprisonment up to five years, might be imposed on those conducting such targeting activities without a license.

This article has been co-authored by Ayça Gümüşay and Damla Çay